Hong Kong’s Withdrawn Tender Underscores Home Price Concern

A fenced plot of land stands next to the Tsuen Wan West MTR Corp. train station in Hong Kong. The government is one of the city’s biggest suppliers of unoccupied land for housing. Photographer: Jerome Favre/Bloomberg

Jan. 13 (Bloomberg) -- The Hong Kong government yesterday
withdrew the tender for a property project at a subway station
and sold another site for less than estimated, underscoring
concerns that home prices in the city may fall further.

The company set up by the government to manage Bayside, a
project above a station in the city’s northwest, rejected
tenders for the site, according to a statement. The site, with
gross floor area of 2.2 million square feet, was expected to
fetch HK$7.4 billion ($953 million), according to the median
estimate of five surveyors in a Bloomberg News survey.

Home prices in Hong Kong increased 70 percent between the
beginning of 2009 and their 14-year-high in June and have since
fallen 3.5 percent as increased borrowing costs and taxes
deterred buyers. The government tightened mortgage lending
requirements and restarted scheduled land auctions, which were
halted in 2004, to help slow surging prices.

“It’s obvious developers are getting more cautious,” said
Eddie Hui, a professor in the Department of Building and Real
Estate at the Hong Kong Polytechnic University. “They’re very
mindful of all the additional supply that will be put into the
market by the government.”

Home prices in Hong Kong, the world’s most expensive place
to buy a home according to Savills Plc, may fall as much as 25
percent between now and 2013, according to Andrew Lawrence, Hong
Kong-based analyst at Barclays Capital Research.

Below Estimates

A second site put up for tender above the station in Tsuen
Wan West was sold to Chinachem Group. The closely held developer,
controlled by the family of the late Nina Wang, paid HK$2.6
billion for the 711,000 square-feet Cityside project adjacent to
Bayside, the company said in a statement. That site was expected
to sell for HK$2.7 billion, according to the Bloomberg News
survey.

The government is one of the city’s biggest suppliers of
unoccupied land for housing. MTR Corp., Hong Kong’s railway
operator, sells land to developers for a portion of their profit
from the resulting projects.

The two sites at Tsuen Wan West attracted 12 tenders,
Sallus Wong, a spokeswoman for MTR, said in a phone interview on
Jan. 9. The two projects will contain about 3,300 residential
units.

Tsuen Wan, in the northwestern area of Hong Kong, is a
mixed residential-industrial district about a 45 minute subway
ride to the city’s Central business district. Chinachem is one
of the biggest landlords in the area with landmarks including
Nina Tower, named after its late chairwoman.

Separately, the government sold a site in the city’s
northeastern Tseung Kwan O district to Wheelock Properties Ltd.,
the developer controlled by billionaire Peter Woo, by tender for
HK$1.86 billion, the company said yesterday.

The Hang Seng Property Index, which tracks the seven
biggest builders in Hong Kong, lost 24 percent in 2011, compared
with the 20 percent drop in the benchmark Hang Seng Index, of
which it’s a component.